On the first day of the fiscal year, a company issues $32,000, 11%, five-year installment notes that have annual payments of $8,658. The first note payment consists of $3,520 of interest and $5,138 of principal repayment.

Question

Question Content Area
a. Journalize the entry to record the issuance of the installment notes. If an amount box does not require an entry, leave it blank.

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Question Content Area
b. Journalize the first annual note payment. If an amount box does not require an entry, leave it blank.

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Answer 1

To record the issuance of the installment notes and the first annual note payment, we'll consider the provided information regarding the notes payable.

a. Journal Entry to Record the Issuance of the Installment Notes

When the company issues the notes, it will receive cash (or its equivalent) and will incur a liability for the notes payable.

Journal Entry:

| Date | Account | Debit | Credit | |---------------|-----------------------|-------------|-------------| | [Date] | Cash | $32,000 | | | | Notes Payable | | $32,000 |

b. Journal Entry to Record the First Annual Note Payment

In the first annual payment, part of the payment is interest expense, and part of it is a reduction of the principal.

Journal Entry:

| Date | Account | Debit | Credit | |---------------|-----------------------|-------------|-------------| | [Date] | Interest Expense | $3,520 | | | | Notes Payable | $5,138 | | | | Cash | | $8,658 |

Make sure to replace [Date] with the actual dates when recording the transactions in your records.